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July 09, 2018
Before you start looking for your dream home, it’s important to know your credit score and how it can affect your finances after you apply for a mortgage loan.. Generally, the better your credit score, the better home loan terms you’ll qualify for. The difference in interest between someone with a FICO score of 650 versus someone with 750 could be hundreds of dollars a month and tens of thousands of dollars over the credit-scorelifetime of the mortgage.

I get it, I need to clean up my credit — but how?

Here’s our advice for increasing your credit score in five simple steps:

  1. Check your credit

Get your free annual credit report from the three major reporting agencies: Equifax, Experian, and TransUnion. Your report is a roadmap for what you need to fix. Whether you have outstanding collections that you’re unaware of or delinquencies you need to dispute, you’ll know where to start only after taking a comprehensive look at your credit report.

  1. Put together a payoff plan

If you’re carrying high balances on your credit cards, you may be damaging your credit. Lowering your balance and freeing up available credit will raise your score. Be careful though: While paying off credit cards helps your score, closing an account can actually hurt it.

  1. Pay your bills on time

35 percent of your credit score is based on your payment history. If you’ve been lax about paying your bills on time, now’s the time to change your habits. Use auto pay for all the bills you can, and add payment dates to your calendar for those you can’t. And it’s never a bad idea to pay your bills a few days ahead of schedule (if possible).

  1. Open a secured credit card

If you have poor credit or you’re still trying to establish credit history, opening a secured card is a good way to get your foot in the door. Use the card for purchases you normally make during the month (groceries, gas, etc.) and then pay the monthly balance in full, on time.

  1. Ask for a credit limit increase

Part of your credit score is determined by the amount of existing credit you have available to you. If your current card limit is only $500 and you’re using it to pay some of your bills, you may be spending more than 30 percent of your monthly available credit — this hurts your credit score. By increasing your limit (but not your usage), you can gain points.

Contact us today to find out which mortgage options you may qualify for based on your credit score.

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